The evolution of the telco: Past, present and future

By Michael Pawlak, Senior Industry Consultant Communications, SAS

The telecommunications industry is eveolving at a dizzying rate. In fact, to talk about “the telco of the future” in technological terms is almost fruitless; it’s a moving target, and by this afternoon, something will have changed.

But by looking at telecommunications’ history, and the state of the technology today—as best we can get a marker on it—we might get a clearer view of where we’re going tomorrow. (And that may literally be tomorrow.)

In the infancy of telecommunications, the process was entirely manual. A Lily Tomlinesque operator (if you don’t get the reference, search for Laugh-In on YouTube) would manually use patch cords to connect telephones within the same exchange, which was manageable at the time because there were so few phones. If you wanted to speak with someone at another exchange, the operator would patch you through to a different exchange—a trunk, or long distance call—where the process would be repeated. After several exchanges, you were likely to discover that Uncle Earl wasn’t at home at the time.

After many years, much of the process became automated. Phones had dials to ring in numbers, Lily Tomlin was replaced by a switching system, and companies could buy private branch exchanges (PBX) to meet their burgeoning telephonic needs. But all of this automation was mechanical. It streamlined the process, but was bound by mechanical constraints. Touch-tone dialing was a quasi-digital advance that opened the door for many of the technologies we take for granted today—dialing by extension, leaving and retrieving messages, IVR (at least a primitive form thereof).

TODAY’S TELCO

Today’s telco deals with a different set of realities. We’ll talk about the business impacts in a future post; for now, we’ll just deal with the technological implications.

* Consumer customers are cutting the tether. There are several trends behind the abandonment of the landline. Chief among them, of course, is the lower cost and higher available of mobile technology. Another driver is the coming explosion of devices in developing nations, where the economics of mobile infrastructure are much more attractive than that of landlines. We’re at more than 3.5 billion mobile subscribers worldwide already; developing countries will add almost another three billion subscribers in the next three to four years. That will require about $1.4 trillion in infrastructure investment.

* Mobile usage is outstripping landline usage, but perhaps a more interesting trend is that, even among mobile users, data usage is outstripping voice traffic. According to Cisco Systems Inc., mobile data trafiic has grown 4,000-fold in the last 10 years. A sea change in the telco industry is that it’s not about voice traffic anymore. It’s about data—SMS, video, chat, general internet usage. Infrastructure has to reflect that.

* While much of the world is still developing 3G infrastructure, 4G traffic is growing at a higher rate. In fact, in 2015, 4G data traffic surpassed 3G traffic—47 to 34 per cent. And 5G infrastructure is on the way, because tomorrow’s telco can’t get by without it. And mobile devices are increasingly using WiFi and femtocell technology to offload mobile traffic—51 per cent of it—onto the fixed network. Mobile may have become the new consumer connection of choice, but the wired network is still relevant; the role has simply changed.

TOMORROW’S TELCO

The coming 5G technology will offer 100 gigabits per cent connectivity, roughly 1,000 times a s fast as 4G connectivity. Why can’t the telco of the future live without it? Because of the Internet of Things (IoT).

So what are the major impacts on the telco environment, technologically speaking?

* Interactive data usage is already outstripping voice traffic. Soon, non-interactive data—machine to machine data—will surpass even that. The network must be optimized for data traffic rather than voice traffic.

* As a corollary, in order for the network to function, voice traffic must become data traffic in order to coexist on a data optimized network.

* Data traffic on Wi-Fi networks is surpassing data traffic on cellular networks. Telcos will have to examine their architechtures to accommodate this shift. As more low-frequency wavelength, which will allow providers to push Wi-Fi connections further—so-called “white space”—becomes available, this will become a pressing issue.

* The backplane is becoming virtual. Thanks to software-defined networking (SDN), the jobs of dedicated switches and routers can be handled by cheaper, commodity computing hardware. As dedicated hardware reaches end-of-life, telcos would be wise to investigate whether the SDN approach better suits their traffic than dedicated hardware. Investigate how best to handle east-west traffic.

* The enormous varity, velocity and volume of data that can be collected from this traffic—geographic information system (GIS) data, time of usage, type of usage—can be used, with advanced analytics, to optimize network performance and the customer experience. We’ll talk more about the latter our next conversation.